Accord Pacific Holdings Pty Limited v Accord Pacific Land Pty Limited

Judgment 1HER HONOUR : Before me for hearing on 23 and 27 June 2011 was an application by Accord Pacific Holdings Pty Limited (APH) seeking relief pursuant to ss 596A, 596B and 1321 of the Corporations Act 2001 (Cth) by way of orders setting aside various examination summonses and orders for production of documents issued on the application of the liquidator of its wholly owned subsidiary, the first defendant (Accord Pacific Land Pty Limited (APL)). The summonses and orders for production were directed not only to APH but also to another of its subsidiaries (Accord Pacific Properties Limited, the 10th defendant, APP), various directors and officers of the Accord Pacific group companies (the 3 rd to 9 th defendants), and two firms who have acted for APL as real estate agents/solicitors respectively (the 11 th and 12 th defendants). 2The second defendant (Mr Bruce Gleeson) was appointed as liquidator of APL in March 2011 by unanimous resolution of the creditors of the company following the retirement at that time of the liquidators initially appointed to the company in December 2010, Messrs Hancock and Hird. APL had earlier been placed in voluntary administration by its directors in November 2010. 3The basis on which APH seeks to have the summonses and orders set aside is that they are an abuse of process. The liquidator maintains that the orders are not an abuse of process but, rather, a legitimate exercise of his power to investigate the examinable affairs of APL (and, in particular, to investigate two issues - first, whether the company was engaged in insolvent trading in the period leading up to its placement in external administration and, second, whether the directors of the company acted in breach of their fiduciary duties in committing APL in 2007 to a lease of a commercial car park in Sydney at an unsustainable rent). 4Both parties emphasise that this is an unusual winding up in that there are only two creditors of APL: Hyperion Syndicates Limited (which is the lessor of the car park in question and which has issued a proof of debt totalling $9,445,046.45 - for rent outstanding as at the time the APL went into administration in the sum of $204,523 and for unpaid rent for the unexpired term of the lease in a much greater sum) and APH, for financial support given to its subsidiary over a four year period (totalling some $4,282,519). (Hyperion's claim cannot at this stage be finally quantified as it will depend upon its ability to locate an alternative tenant or otherwise satisfactorily to mitigate its loss. Nevertheless, it maintains that it is a substantial creditor of APL.) The position is complicated by the fact that it was APP (also a subsidiary of APH) that sold the car park to Hyperion in the first place. 5The position seems to be that Hyperion is of the view (somewhat ironically, since it is the car park lessor) that the rent was, and should have been realized to have been, so excessive or unaffordable as to lead to the suspicion that the directors of APL had agreed to it (in breach of their duties to APL) in order to produce a benefit for a related company (the vendor, APP) in the way of an increased sale price (since higher rent meant that the capitalized yield on which the purchase price may have been based would be greater than it otherwise may have been) and also of the view (the logic of which is criticised as flawed) that APH provided financial support for APL in order knowingly to permit it to trade whilst insolvent. Those are the matters that it wishes to fund the liquidator to investigate (and that, in turn, the liquidator is now seeking to explore by means of the examination summonses and orders for production). 6For its part, APH takes the view that it cannot possibly be said that APL was engaged in insolvent trading and therefore there is no utility in the proposed investigations and they must be an abuse of process. In essence, APH contends that the examination summonses and orders were sought by the liquidator not for the benefit of APL (the company in liquidation) but, rather, for the benefit of Hyperion in an attempt to put commercial pressure upon APH (to settle a potential claim by Hyperion against APH or its officers) or to obtain information as to a potential claim by Hyperion against APP (in relation to representations made at the time of the sale by APP to Hyperion of the car park).

Background 7APH is the Australian holding company of a group of companies based in Singapore (the Lian Huat Group of Singapore). APP and APL are its subsidiaries. There are common directors of each of APH, APP and APL: those being two directors based in Singapore (Mr Choon Keng Kho and his brother Mr Chuan (Patrick) Thye Kho) and one based in Australia (Mr Steven Gargano). From Mr Gargano's evidence in an examination that has already been conducted by the liquidator, his role in the management of the company was very limited. The regional head of APL in Australia is Mr George (Will) McDonald. According to Mr McDonald (in his evidence on cross-examination in the present application), APL is a Singaporean family company and decisions in relation to APL are made by the directors in Singapore (to whom he makes recommendations only). 8On 20 October 2006, APP sold the property known as the "One Dixon Car Park" to Hyperion for the sum of $9.2m. Hyperion is a property business in which two accountants carrying on business in the accounting firm R&G Consulting (Mr Ian Greenwood and Mr Steven Higgins) have an interest. R&G Consulting had from time to time referred work to Mr Gleeson. 9The purchase transaction involved the lease back from Hyperion to APL of the car parking station for a ten-year term expiring in 2017. A lease commencing in March 2007 was entered into for that purpose. The only business of APL (albeit unbeknownst apparently to its resident local director, Mr Gargano) was the operation of the car parking business from the leased premises (in respect of which it had entered into a car park management agreement with a third party). 10It is not in dispute that APL was never able to meet its rental obligations under the lease based on its trading income alone. Over the period from 2007, in each financial year it had a net trading loss and a deficiency of assets over liabilities. There is no doubt that substantial funds were provided by APH to APL in order to enable it to meet its rental obligations and other debts. According to a document prepared by Mr McDonald by way of an overview for the liquidator (a copy of which was included in the Court Book), the provision of this financial support was by way of inter-company loan repayable on demand. No contractual agreement under which APH assumed an obligation to provide such funds to its subsidiary has been produced to the liquidator, nor has any finance agreement as such been identified as having been in place in that regard. 11On 4 November 2010, APL was placed in voluntary administration. Messrs Hancock and Hird were appointed as administrators. Prior to the second meeting of creditors (held on 9 December 2010), the administrators prepared a Report to Creditors in accordance with the requirements of Part 5.3A of the Corporations Act 2001 (NSW). In that report, which was in due course tabled at the second creditors' meeting, they noted the historical trading losses that had been incurred by APL and concluded that there was a "prima facie" argument that there had been insolvent trading (though also noting that evidence of the related parties' support might be relevant to such a claim). Reference was made to the need for further investigations into the company's affairs in the event of a winding up. (Mr Hancock has since sworn an affidavit, which was read by APH on the current application, in which he now expresses the view that the company was not insolvent at the relevant time. Seemingly fortified by that view, the position of APH (by reference to the communications from Mr Patrick Kho and Mr McDonald) has been stridently to assert that the company was at the relevant time solvent and that any inquiry into insolvent trading would be of no utility. 12As noted, the second meeting of creditors was held on 9 December 2010. Prior to that meeting, Messrs Greenwood and Higgins had consulted with Mr Gleeson as to the position of Hyperion having regard to the entry of the company into administration. (Whether they did so as members of R&G Consulting on behalf of Hyperion or as principals of Hyperion is perhaps a moot point, although issue was taken in passing during the course of the submissions before me as to whether there had been a sufficiently complete declaration of independence by Mr Gleeson when he later took on the role as liquidator, having regard to the previous referrals of work to him from R&G Consulting.) 13The first meeting in this regard seems to have taken place on 2 December 2010 (as recorded in a brief file note taken by Mr Gleeson). By letter of that date, Mr Gleeson wrote to Messrs Greenwood and Higgins at R&G Consulting referring to the meeting to discuss the administration of the company, confirming his preparedness to act as liquidator in any ensuing winding up, and seeking confirmation as to whether the administrators had reviewed the financial position of APH to be able to comment on the applicability of the voidable transaction provisions and the position of directors in the context of insolvent trading claims. 14Following that meeting Mr Gleeson reviewed the Report to Creditors (describing it to Messrs Greenwood and Higgins on 3 December 2010 as a "fairly plain report and not surprisingly misses some very important aspects") and arranged a telephone conference with Gillis Delaney, the solicitors in due course retained first by Mr Hancock and then Mr Gleeson to conduct the examinations and presently acting for the liquidator on this application. (Mr Higgins' interim comments on the report, as provided to Mr Gleeson, had taken issue with the fact that it had put Hyperion's claim only at the actual rent outstanding "even though we have supplied a proof of debt at millions".) 15Mr Gleeson, providing the 'relevant background' to Mr Hayter of Gillis Delaney by email on 3 December 2010, noted (presumably on the basis of instructions obtained from Hyperion) that: The issues are that the lessee company has been insolvent for some years and is a wholly owned subsidiary and in turn there is an ultimate holding company for it. Both entities upstream have significant assets it is believed ... 16On 8 December 2010, Mr Gleeson wrote to Mr Hancock, advising that he had been approached by one of the creditors (Hyperion) to be appointed as liquidator and attaching a declaration of independence that stated that he had had no prior relationship with the company. 17Mr Gleeson attended the second creditors' meeting with a signed Consent to Act as liquidator, which, in the event, was not tabled as there was no contest to the appointment of Messrs Hancock and Hird as liquidators following a discussion between Mr Hancock and Mr Gleeson as to the former's willingness to conduct public examinations of the company's directors. (This early involvement by Mr Gleeson in the matter, at the behest of the principals of Hyperion, is relied upon by Senior Counsel for APH, Mr Aldridge SC, as a matter going to what inference should be drawn from Mr Gleeson's later conduct in seeking the issue of the respective orders/examination summonses against APH and associated parties.) 18The minutes of the second creditors' meeting refer to the tabling of the report of the joint and several administrators at the 9 December 2010 meeting and record that Mr Greenwood (of Hyperion) had raised concerns at the meeting regarding the company's losses and had requested examinations by a liquidator against the directors of APH and APL. The minutes note that "the public examination will be funded by Hyperion". They conclude by recording that Mr Gleeson had requested "confirmation of the discussion taken with Hyperion ... before the meeting"; had raised (and if the report is accurate he would seem to have echoed Mr Greenwood's position in this regard) concerns regarding the company's losses and had requested that examinations commence against the directors of the holding company (APH) and APL by Mr Michael Hayter, solicitor of Gillis Delaney, to which request Mr Hancock had agreed. (Mr Aldridge points to this as evidence that Mr Gleeson was acting in the interests of Hyperion at the time of this meeting and it does not seem that this could be disputed.) 19By letter dated 9 December 2010, Mr Gleeson reported to Messrs Greenwood and Higgins on that meeting of creditors, referring to Mr Hancock's willingness to conduct public examinations and, after setting out various comments, said: The above aspect (and action points) do not mean that you cannot and should not have ongoing communication with relevant parties in the context of trying to advance and deal with the position that Hyperion is in. However, as has been discussed with you, I believe it is appropriate to continue to keep pressure on APH and the directors in order to give Hyperion the best possible chance of achieving a good commercial outcome (my emphasis) 20(Pausing there, Mr Aldridge points to the references to there being pressure on APH and/or its directors which can be found in correspondence over the course of the relevant period as indicating an improper purpose. Mr Golledge, on the other hand, submits that what was referred to in that context was the pressure to attend and submit to an examination. While that may be the case for later such references, in this early communication the pressure there urged to be continued must relate to pressure to resolve Hyperion's claim(s) on a commercial basis. Of course, at this stage Mr Gleeson is advising Hyperion and not speaking in the capacity he later assumed of liquidator.) 21As to the funding of the proposed examinations, Mr Hancock's understanding as at 16 December 2010 (as set out in a letter to Mr Greenwood of that date) as to the funding of the then proposed examinations was that he would contribute $15,000 from funds realized out of company assets for the cost of the proposed examinations and Hyperion would underwrite the balance. There was no response from Hyperion suggesting that this understanding was mistaken. 22Not long after their appointment as liquidators, Mr Hancock and Mr Hird retired (apparently as a consequence of a concern arising as to a potential independence issue, the detail of which was not before me). On 21 February 2011, there was a creditors' meeting at which they resigned. They were replaced by Mr Gleeson by unanimous vote of the creditors. The fact that Mr Gleeson had previously been providing some advice or assistance to Hyperion must then have been known to APH (if not from the fact that this had been made clear to Mr Hancock prior to the 8 December 2010 meeting, then from the fact that the minutes recorded Mr Gleeson as having attended at that meeting and having advocated that public examinations of the (common) directors of APH and APL take place, as Hyperion's representative had also done). 23It seems that there was some pressure from Hyperion for urgent steps to be taken in relation to the proposed public examinations since, on 4 March 2011, Mr Gleeson sent an email to Messrs Higgins and Greenwood assuring them that "we are giving this urgent attention". 24On 9 March 2011, the first set of orders for production of documents and examination summonses were issued against a number of people. Mr Aldridge characterises the orders so sought as going to the heart of the company's examinable affairs (on the basis that they related to an investigation into the company's financial history) and points out that no objection was taken to this use of the compulsory examination process. That is so. However, as will be apparent from the events that followed the issue of those orders, it could equally be said that there was not a particularly co-operative response (at least from the Singaporean directors) to the processes being invoked by the liquidator and it is this attitude that seems to have fuelled a somewhat confrontational atmosphere between the liquidator and those acting for the liquidator on the one hand and APH and its representatives on the other. 25In particular, although (by letter dated 25 March 2011) Colin Biggers & Paisley had initially written to Gillis Delaney advising that they acted for the "directors" of APL (who they expressly noted included two directors resident in Singapore) and taking issue with whether leave had been obtained for service of the process outside the jurisdiction, when the solicitors were pressed to seek instructions to accept service for those overseas directors (and it was not unreasonably put to them that this would minimize expense and avoid the incurring of unnecessary costs in the liquidation) they ultimately responded (by letter dated 20 April 2011) that having "revisited" their first letter it had been an "oversight" and that they did not act, and had no instructions to accept service, for those directors. 26This elicited a response by letter dated 20 April 2011, from Mr Hayter to Colin Biggers & Paisley that it would appear the overseas directors had breached their statutory obligations in Australia referring to the possibility of a report to ASIC and requesting information from the resident director as to current email addresses and telephone numbers and questionnaires from the directors and information as to when the overseas directors would next be in Australia. 27Requests by the liquidators for the provision of a report as to the company's affairs from the overseas directors were met with a similar lack of co-operation (and when one of the Singaporean directors, Mr Patrick Kho, did ultimately engage in email communications with the liquidator on this topic his answers were largely non-responsive and sought to interrogate the liquidator as to the basis for those enquiries). 28In any event, the upshot of the resistance apparently encountered by the liquidator from the overseas directors to co-operation with and participation in the liquidator's enquiries led the liquidator to seek substituted service of the orders on the overseas' directors and (on more than one occasion) to threaten to report them to ASIC for failure to comply with their statutory obligations. It also seems to have had the result that there was some initial delay in the liquidator calling on the first set of Orders for Production and in the holding of the first round of examinations. 29Some documents were produced in answer to the Orders for Production prior to the holding of public examinations of 5 individuals in May 2011 (including, two persons who are now the subject of the further examination summonses, Mr Gargano and Mr McDonald). There has since then been an ongoing dispute between the solicitors acting for the APH interests and those acting for the liquidator as to whether there has been full compliance with the Orders for Production (and this is said in part to be what has led to the need for further Orders for Production to be issued, for more abundant caution, even though the liquidator contends that certain of the documents he is seeking should already have been produced in answer to the initial Orders for Production). 30Of the list of examinees now proposed to be examined, there are a number, including the Kho brothers, who have not previously been examined (and hence it could not be said that there is any oppression by reason of those examinees being required to attend twice). As far as Mr Gargano and Mr McDonald are concerned, it is said that had there been proper production in the first place it might not have been necessary for them to be re-examined. 31In June 2011, a second set of orders for production and examination summonses were issued on the application of Mr Gleeson. It is those that APH is now seeking to have set aside as an abuse of process. 32As to the documents now sought to be produced, Counsel for Mr Gleeson (Mr Golledge) maintains that they are obviously relevant to a matter properly the subject of a liquidator's examination. The Orders for Production issued to APH and APP are in substantially the same form and seek four categories of documents, which may broadly be summarised as follows: (i) correspondence and internal memoranda passing between any of series of named individuals (including Mr McDonald, Mr Gargano, Mr Patrick Kho, Colin Biggers & Paisley "and any third party"), for the period from 1January 2005 to date, referring to any of a number of topics, including: (a) the sale and proposed sale of the car park in 2006; (f) the intention to appoint an administrator or liquidator to APL or a recommendation to do so; (i) the examination being conducted or to be conducted by the liquidator; and, in very general terms, (k) "any matter relating to the Company" ; (ii) emails and correspondence produced to Colin Biggers & Paisley in respect of the previous Order for Production served on the addressee; (iii) all documents prepared "or taken into account by" APL in respect of the company entering into the lease of the car park (and particularly a report prepared on behalf of APL prior to entering into any such lease and referred to by Mr McDonald in his evidence in these proceedings on 11 May 2011); and (iv) any laptop computer or hard drive "used by employees or your company to forward or receive any of the emails referred to in any of the above paragraphs". 33I consider in due course the complaints made as to the breadth and/or relevance of what is now sought to be produced. 34The first Orders for Production served on APH covered a larger field - including minutes of meetings over a considerable period; loan agreements; budgets, cash flow forecasts and management accounts for APH and APL; employment records; financial reports provided by APL to APH on a monthly basis; funding agreements or letters of comfort; budgets and cash flow forecasts referring to the financial performance of the car park business (during the period 1 January 2005 to date); invoices from accounts and correspondence with the managing company of the car park. Also included in the initial Orders - and the focus of much of the complaint as to alleged non-compliance with the orders - was item 4 (correspondence and internal memoranda passing between employees of the parent company and/or the parent company's accountant referring to various topics, those being more limited range of topics than the present orders) and item 9 (emails, correspondence or other documentation referring to the circumstances in which the parent company intended to or did in fact withdraw its financial support or funding from APL during the period 1 January 2006 to date). 35I note that Orders for Production have also been served on the real estate agents who acted on the sale/lease of the car park on behalf of the Accord Pacific entities (CB Richard Ellis) and on the solicitors who acted on the lease transaction (James Lee solicitors). Documents produced by those firms have been the subject of restricted access orders pending the determination of the present application and any subsequent claim for legal professional privilege that there may be depending on the outcome of the present application. 36The examination summonses have now all been stood over to a date in September this year. 37I was taken in some detail through the correspondence passing between the liquidator, his solicitor (Mr Hayter) and representatives of Hyperion, as well as the correspondence between the liquidator and his representatives on the one hand and persons associated with the Accord Pacific companies and their legal representatives on the other, on which reliance is placed by Mr Aldridge for the assertion that the present orders are an abuse of process and/or which Mr Golledge submits set the context for various of the statements on which Mr Aldridge relies for his assertion that there has been an abuse of process. It will be necessary for me briefly to summarise that evidence in considering the abuse of process allegations but I turn first to the identification of the issues raised on the present application and the legal principles relevant thereto. Issues 38As a precursor to its application to set aside the various summonses and orders for production, APH sought access to the confidential affidavit (or, as it turned out to be, affidavits - since there were three of them) filed on behalf of the liquidator in support of the application for issue of the summonses. 39The issues for determination arise therefore in the following order: (i) Is there an arguable case of non-disclosure or abuse of process by the deed administrator so as to establish a basis for access on the part of the applicants to the confidential s 596C affidavits(s) and, if so, should access be granted? (ii) Should the examination summonses and orders for production be set aside? 40As the first issue before me, logically, had to be determined before proceeding to consider the substantive application, I considered the evidence to which I was taken in the course of submissions and ruled on that application during the hearing. I gave brief ex tempore reasons, which I indicated I would supplement in my written judgment. 41I granted access to the confidential affidavits in question (restricted to the legal representatives of APH). They were subsequently tendered as Confidential Exhibit F, solely as to the fact of what was communicated to the Registrar at that time. I then heard the substantive application. 42I now publish my reasons in relation both to that initial application and to the substantive application. (i) Access to confidential affidavits 43An affidavit required, pursuant to s 596C of the Corporations Act, to be filed in support of an application under s 596B is not to be available for inspection unless the court orders. Such an order will not be made unless the court is satisfied both that there is an arguable case to set aside the determination and that the court would not be able fairly and properly to determine that case if part of the relevant evidence was not available. (See generally the cases cited in Austin and Black, Annotations to the Corporations Act [5.596]). 44When considering the test as to whether access should be granted to a confidential s 596C affidavit, Barrett J in O'Brien v Wily (2009) 74 ACSR 145 (at [27]), noted the threshold question as being whether there is an arguable case that the issue of the summons exceeded the Court's power: In a case such as the present, the court considering the application for review may or may not have before it the s 596C(1) affidavit filed in support of the application for the issue of the examination summons. In Meteyard (above) at [140] and [141], Basten JA made it clear that a person seeking to have an examination summons set aside does not, merely by mounting the challenge, place an evidentiary burden on the liquidator to reveal the content of the s 596C(1) affidavit. If the person who has initiated the challenge wishes to the affidavit to be before the court for the purposes of its review, that person must first show that there is an arguable case that the issue of the summons exceeded the court's power under s 596B and that access to the affidavit is likely to assist in determining the correctness of the challenge: see also Ariff (above) at [25] and [26]. In other words, if that person wishes to ensure that the s 596C(1) affidavit is before the court upon the review, the person must independently negotiate the s 596C(2) hurdle. (my emphasis) 45The ground on which access to the confidential affidavits was sought in the present case as indicated in my introduction to these reasons was that there was an arguable case that the application for the examination summonses was for an improper purpose or involved an abuse of process. 46At the outset I note that in the correspondence to which I was taken, a challenge was made as to the utility of the examinations, to which Mr Gleeson had responded simply by expounding the view that there were matters that might appropriately be the subject of investigation. Insofar as it is submitted by Mr Aldridge that support can be drawn from the fact that the liquidator did not then articulate (and has not later articulated in evidence) the reason for seeking the examinations, I note that the evidentiary burden does not lie on the liquidator in this regard ( Meteyard & ors v Love & ors [2005] NSWCA 444 at [140]-[141]; O'Brien v Wily at [27]). White J, in In the matter of Mendarma Pty Ltd (in liq) [2006] NSWSC 1306, expressly disagreed with a submission there made that improper purpose could be inferred from the fact that the liquidator had not responded to certain correspondence and had not sworn a further affidavit responding to matters raised with him, saying: .... In my view, there was no occasion for [the liquidator] to do so. The applicants cannot establish he had an improper purpose merely by making a wide range of allegations which were patently without substance, and then relying on his not responding to those allegations as a basis for inferring that he had an improper purpose. 47I draw no inference of improper purpose from the fact that the liquidator has not engaged in debate as to his purpose in seeking the issue of the examination summonses (I suspect, from the tone of the correspondence to date, that any such response would be likely to have proved inconclusive in resolving the dispute as to whether the examinations should now proceed in any event.) 48It is accepted by both parties that the legitimate purpose of an examination under s 596B is to elicit information for the benefit of the corporation, its contributories and creditors. Here, the position is complicated by the fact that there are only two creditors and one of those is the company's only contributory. Moreover, the examination appears to be intended, at least in part, to elicit information relevant to a claim against one of those two creditors (or its officers) and the examination is to be funded to an extent by the other creditor. 49The improper purpose suggested by Mr Aldridge is that the procedure has been invoked in order to provide Hyperion with an advantage - either by placing pressure on APH to reach a commercial settlement with Hyperion (the latter wishing to be made good by APH for its losses of entering into the lease transaction) or to obtain information to assist in a claim by Hyperion against APP in relation to entry into the sale transaction or against the directors of APL (or APH) in relation to insolvent trading and voidable transactions. 50Reliance is placed by Mr Aldridge in this regard on the fact that there has been a second round of Orders for Production seeking a broad range of documents (some of which are said to have no relevance to the examinable affairs of APL or which have already been the subject of an order for production); on the breadth of the requests so made; on what is said to be the weakness of any claim of insolvent trading of the kind now said to be the subject of investigation; on the flavour of what has emerged from the private correspondence between the liquidator, his solicitors and the Hyperion interests; and on what is alleged to have been said (and not denied) by Mr Greenwood at the time of the initial examination of Mr McDonalds to the effect that Hyperion would pursue the matter while funded or refer it to ASIC unless Hyperion was made good. 51Thus the complaint, as I understand it, is not so much a complaint of the kind considered in Mendarma (that this is a 'dress rehearsal' for proceedings that are pending or that the liquidator might be contemplating bringing on behalf of the company in liquidation or an attempt to obtain an impermissible forensic advantage in such proceedings) but, rather, that this is an attempt to procure information to support a claim that the creditor may seek to make against a third party (APP) related to the company in liquidation or to put commercial pressure on APH to settle Hyperion's claim(s). 52In Hong Kong Bank of Australia Limited v Murphy (1992) 28 NSWLR 512 Gleeson CJ said (at [518] - [519]) that: ...the fact that current proceedings are pending makes it necessary for the court to be alert to the possibility that a proposed application might be used for an improper purpose. 53There is general authority that the use of court process to secure a collateral advantage by way of a commercial settlement or compromise of a claim before trial, where it can be said that the proceedings are not instituted to vindicate a genuinely asserted right, may be an abuse of process ( White Industries (Qld) Pty Limited v Flower & Hart (1998) 156 ALR 169). A distinction must be drawn, however, between the motivation or purpose of Hyperion in this regard and that of the liquidator. 54Lander J in Re New Tel Limited (In Liquidation); Evans v Wainter Pty Ltd (2005) 221 ALR 331; 54 ACSR 284 (at [252) in a passage referred to by White J in Mendarma , summarized the relevant principles in relation to improper purpose in the context of other proceedings that the liquidator has brought or is contemplating bringing, including that: 4. If an eligible applicant applies for an order for the examination of a person for a purpose unconnected with the purposes authorised by the legislation that will be an abuse of process and the order, if obtained, will be set aside. 5. The procedure may not be used to allow a party to obtain a forensic advantage and, if it is, any order obtained will be set aside. 6. The procedure may not be used as a dress rehearsal for the cross-examination of a person in a pending or subsequent action. However, it is not improper to seek an order of the court to summon a person for examination while litigation is pending against that person or entities connected with that person. 7. The question whether in any particular case the applicant has used the procedure abusively will depend upon the applicant's purpose in seeking the order and all of the surrounding circumstances. It will not be an abuse unless an offensive purpose is at least the predominant purpose. 55In Mendarma , White J emphasised that what was necessary was that the improper purpose be the dominant purpose.

• Evidence of purpose 56Does the evidence reveal an arguable case of improper purpose or abuse of process in order to satisfy the first part of the test in O'Brien v Wily ? This requires a review of the correspondence on which reliance was placed by Mr Aldridge. 57There is no doubt that, prior to Mr Gleeson's appointment as liquidator, he was party and/or privy to communications between Hyperion and Gillis Delaney as to how to pursue an examination into the financial affairs of the company and the circumstances in which the company had traded. There is also no doubt that a view (or at least a preliminary view that formed the basis of their advice) had been reached by the lawyers advising Hyperion that it was likely that a primary issue in those examinations would be whether the directors and the parent company would be liable for an insolvent trading claim. 58Mr Hayter's letter of 21 December 2010 to Mr Hancock notes that this "raises some interesting issues in that the principal debt incurred by the subsidiary during the relevant period was in fact the debt payable to the parent company as opposed to the usual insolvent trading claims pursuant to this section where the debts are usually incurred to various third parties" and expressed the opinion that there was "little doubt" that the company was insolvent at the relevant times by reference to its balance sheet. That letter noted that a crucial matter to investigate would be whether the debt due to the parent company was legally postponed and, if so, on what terms and said that as well as investigating the insolvent trading claim and possible breaches of fiduciary duties "we will also investigate the circumstances in which" the parent company failed to provide a renewal bank guarantee to Hyperion in 2009 and its reasons for its failure to do so and whether the parent company and or the directors knew at the time the property was entered into and the lease was sold hat it was unlikely that the subsidiary would be in a position to service the future lease payments and the entry into the lease by the subsidiary as an inducement and incentive for the sale to proceed. (Of course, that letter was written at a time when Mr Hayter was retained by Mr Hancock, as is evident by reference to the last paragraph.) 59There is also no doubt that Hyperion's representatives had input into the identification of the kinds of documents that might be sought in relation to the proposed examinations and as to the issues to be explored in those examinations, (see, for example, letters dated 13 December 2010 and 18 January 2011 from Mr Hayter to Mr Greenwood). (Mr Aldridge relies on Mr Greenwood's response by email to the latter, in which Mr Greenwood suggested that the financials from the date of incorporation should be sought "seeing the parent company loan was in existence prior to the lease", as evidence that the orders for production are "fishing" for information for the benefit of Hyperion.) 60Mr Greenwood also later had involvement in the preparation for the examinations (see letter dated 5 May 2011, from Mr Hayter to Mr Greenwood seeking assistance in terms of preparation for the examinations and clarification of various matters, all of which Mr Aldridge notes related to the circumstances of the sale). 61By letter dated 10 February 2011, Mr Hayter wrote to Mr Greenwood noting that "As part of the Examinations it will be important for me to show that Accord had reason to believe when it entered into the lease that the company would not be able to satisfy lease payments from normal trading."(emphasis in original). Mr Aldridge says that this shows that the present enquiry is not to assist the liquidator to form a view but, rather, is trying to demonstrate that these are the facts having already formed the view. It should be noted, however, that this was an expression of opinion not by or to the present liquidator (and would be consistent with Mr Hayter advising Hyperion, independently of the liquidator, what it is that would ultimately need to be established for there to be a finding of insolvent trading as suspected). As Mr Golledge submits, the very purpose of examinations in this context is to ascertain whether any view as to likely insolvent trading is correct - it cannot be the case that having formed a view that there may have been, or even that it is likely that there has been, insolvent trading, a liquidator then cannot properly enquire into this, using the coercive powers available under s 596. 62The response from Mr Steven Higgins was to raise issues as to the basis on which the purchase decision had been based (suggesting a claim against the vendor for misrepresentation of some kind) and noting "Good to see 588V getting a mention. Parent companies cannot simply hide behind subsidiaries and think their liability is limited". (Similarly an email from Mr Higgins to Mr Hayter's assistant, Ms Jane Montague, expresses the opinion that APL could never cover the rent and outgoing and could not sign the lease knowing the company was solvent but "need hard evidence on this" and suggested that pre sale figures "may only be available under examination if you are able to request them from the Parent (APL)" and suggesting that what was being sought was evidence that the common directors were fully aware that APL was doomed from the very beginning.) Again, these indicate Hyperion's concerns but do not necessarily indicate the purposes of the liquidator in pursuing the investigations. 63Reliance was placed by Mr Aldridge on various letters from Mr Hayter copying to Mr Greenwood his communications with Mr Gleeson (to show a three way communication between Hyperion, Gillis Delaney and the liquidator) - 4 March 2011, 14 March 2011, 17 March 2011, 14 April 2011, 29 April 2011, 2 May 2011, 4 May 2011, 5 May 2011); a communication from Mr Higgins to Mr Gleeson about court dates on 4 March 2011; as well as communications from Mr Hayter to Colin Biggers & Paisley, copied to Mr Greenwood (20 April 2011). 64Mr Aldridge also refers to a letter from Mr Hayter to Mr Gleeson which noted that "Ian and Steve are anxious to arrange the Examination as soon as possible" but commenting that there was no pressing requirement and it might be better first to review the books and records. (Mr Golledge, in turn, relies on this as showing the independence of the advice given to the liquidator.) 65By letter dated 15 March 2011, Mr Hayter wrote to Mr Gleeson noting that at this stage he would not have expected that any of the employees would have retained documents (yet Mr Aldridge notes that he continues in the Orders for Production to press for them). 66On 11 March 2011, Mr Gleeson emailed Mr Higgins about the examinations and referred to a concern Mr Higgins had raised as to "dissipation of assets from the holding company". That email said: The other ace as well don't forget is the personal trading whilst insolvent action against the directors [and shadow directors] of which it would seem Will McDonald may have some explaining to do - note he signed appointment documents for the company to be placed into voluntary administration. (my emphasis) 67One of the critical documents on which reliance is placed by Mr Aldridge is an email that was sent by Mr Gleeson to Mr Higgins on 6 April 2011 (in terms of the overall chronology this is before Gillis Delaney were advised that Colin Biggers & Paisley, despite their earlier advice to the contrary, did not in fact act for the overseas directors of the respective companies, and after the issue of the first set of Orders for Production and examination summonses but before any examinations had been held). 68That email referred to a letter from Colin Biggers & Paisley in which that firm had raised the fact that Mr Gleeson had been consulted by Hyperion ahead of the change of liquidators - a matter which should already have been apparent from what was said at the second creditors' meeting and by reference to the minutes; had stated that Hyperion was 'agitating' about examinations; and had, by reference to Lewis v Doran [2004] NSWSC 608; (2004) 50 ACSR 175; Williams (as liquidator of Scholz Motor Group Pty Ltd (in liquidation)) v Scholz [2008] FCA 94, Sims v The Deputy Commissioner of Taxation [2007] NSWSC 998 and Scott v Duncan [2007] FCA FC 30 at [410]) expressed the view that as it was clear that external funding was being provided there was no utility in the expenditure of funds for the purposes of conducting an examination as to potential insolvent trading claim. Colin Biggers & Paisley also stated that: It appears that the potential dividend to the ordinary unsecured creditors is being eroded for the purposes of pursuing the wishes of one creditor only in circumstances where there is no utility in that course of conduct. 69Mr Gleeson's reaction to this letter was to comment to Mr Higgins that "I think the pressure is now starting to become apparent for them" (my emphasis). He said that there was nothing that concerned him with any of the issues raised in the letter. 70The 6 April email, referring to the pressure on the directors, is one of a number of communications that appear to acknowledge that the effect, if not the purpose, of the steps taken in relation to the investigation of the company's affairs is to put pressure on its overseas directors. That, of itself, is not the issue - it is whether the predominant purpose of the liquidator was to put improper pressure on the overseas directors. 71By letter dated 4 May 2011, there was a further reference (this time by the liquidator's solicitor) to the pressure on the overseas directors. Mr Hayter in that letter advised Mr Gleeson of the examinations schedule noting that it was 'inevitable' that the sum of $19,423 (a payment made to APH after the company went into administration) would have to be repaid by APH (as a preference) and also noting that the payment of $30,000 made to APH in the month before the administration was after a 'strong demand' from Hyperion. (Mr Aldridge points to the various demands by Hyperion as indicating a preference claim would lie against it, and that no steps appear to have been taken by the liquidator to investigate such a claim.) The letter also noted that at that stage there were 5 parties for examinations (Steven Gargano; Peggy Yeung, George McDonald, Irene Wang, Colin Grady) and that the balance of the summonses would be adjourned balance to enable service upon the rest of the examinees. Mr Hayter then concluded: I confirm that we are putting pressure on the overseas Directors who will no doubt be concerned that reports may be lodged at ASIC concerning their non-co-operation and I will be asking various questions of the Australian Director as to the overseas Directors' whereabouts contact details visits s to Australia etc with a view to requiring their presence on a further date (my emphasis) 72Mr Golledge says that this puts in context what is meant by "pressure" in the earlier communications, namely pressure on the overseas directors to attend for examination and to comply with their statutory obligations (in particular to respond to questionnaires and provide information requested by the liquidator). (I accept that this appears to be the case for most of the communications in which that word appears, though as noted earlier it is hard to read the 9 December 2010 communication in that way.) 73As to what was contemplated to be the subject matter of the examinations, Mr Hayter, writing on 5 May 2011 to Mr Greenwood, advised in relation to the forthcoming examinations that: I suspect that the other parties will focus upon the possibility of an insolvent trading claim being pursued against them and feel confident that the parent company's history of financial support will overcome that difficulty. However there are a number of alternative claims which I will discuss in more detail after the first set of Examinations such as the preferential payments in respect of the 3 payments received prior to liquidation and additionally and more importantly the breach of fiduciary duties if the Directors of the company appear to have preferred the interests of the parent company over the interests of the subsidiary in entering into the transactions. It is important for us to link the sale and lease arrangement. It is also important for me to rebut any suggestion that the Directors reasonably believed that the company may achieve a profit from March 2007 based on its trading figures up to March 2007. 74Also on 5 May 2011, Mr Hayter wrote to Colin Biggers & Paisley and asserted that Mr Gargano had breached his statutory obligations by failing to provided information sought in letters of 18 and 20 April 2011 and asserting that there had been a failure to comply by him, and by APP and APL, with the Court orders for production (in Mr Gargano's case as to paragraphs 3,4,6,9,11 and 12 of the Orders; in the companies' cases those as well as paragraph 8). The letter asserted a breach of the overseas directors' obligations by failing to provide a report as to affairs or details of their current addresses. The letter noted that Mr Gargano and possibly some of the other employees would be examined next week and anticipated that they might shortly thereafter again be examined "when we have the opportunity to review all documents which should have been already produced to date". 75With the background set out above in mind, what then happened (as deposed to by Mr McDonald) seems only to have inflamed the suspicions of APH (and, depending on one's point of view, provided it with a legitimate basis to continue its resistance to the investigations or else provided it with a convenient excuse to do so). Mr McDonald says that he had a conversation with Mr Greenwood (wrongly referred to as a Mr Ian Norwood in a letter sent on 17 May 2011 by Colin Biggers & Paisley, in which this conversation was relied upon as evidence of the improper purpose of Hyperion in relation to the examinations). 76In that conversation Mr McDonald says that Mr Greenwood acknowledged (after Mr McDonald had indicated that he did not think the claim would succeed) that the trading whilst insolvent claim "was not the main issue" and said that they (presumably Hyperion) would continue pursuing the action while funded and then the matter would be handed over to ASIC for criminal action against the directors. It is said that Mr Greenwood indicated that Hyperion wished to be placed in the position it was in before its transaction into the acquisition of the property was completed and that if it was then the foreshadowed action against the directors would not be pursued. (It is not clear whether by that it was being suggested that the whole sale should be set aside or simply that the lease losses should be made good - later discussion as to a potential settlement range suggests the latter.) 77There has been no denial of that conversation by Mr Greenwood (the conversation being admitted in evidence simply as to the fact that the words were said not as to their truth). 78In their 17 May 2011 letter to Gillis Delaney, Colin Biggers & Paisley intimated that this was conduct by Hyperion designed to leverage off a threatened ASIC prosecution for the purposes of attempting to achieve a commercial outcome. The response from Gillis Delaney, acting for the liquidator, was that this did not reflect their client's thinking (and there is nothing to suggest that it was). (Though for completeness I note that there have been a number of references to the reporting of breaches to ASIC, there is no suggestion in the correspondence that this is anything other than a proper response to perceived inattention by the overseas directors to their statutory obligations.) 79Another reference to pressure on the directors was contained in Mr Hayter's letter dated 12 May 2011 to Mr Greenwood (the day after the examination of Mr McDonald, Mr Gargano and others), namely that: You would be aware with reference to the letter to Colin Biggers & Paisley that the contents of that letter will put considerable pressure upon the overseas Directors to accept service and appear at the new Examination date . (my emphasis) 80Again, the reference to "pressure" in that letter was clearly in the context of pressure to attend the examinations and to respond to the liquidator's requests. Mr Hayter enclosed with his letter to Mr Greenwood a copy of his communication to Colin Biggers & Paisley of that date as well as a letter to Mr Gleeson, requesting that they be kept confidential. In the former letter, he had demanded an explanation from that firm and its clients as to various matters arising from Mr Gargano's evidence (that the management decisions were all made by the Messrs Kho; that he was not aware that the company's sole business as a car park business; that he had no information as to the financial affairs of the company; and that he had had no input into the report as to affairs and directors' questionnaires provided to the liquidator). The letter referred to the fact that the examinees had met with Mr Chuan (Patrick) Kho in the solicitors' offices in advance to discuss the examinations and as to the alleged failure to produce documents (including emails, the due diligence report and recommendations by McDonald). It again demanded contact details. It also demanded an explanation of the failure to provide Mr Gargano with correspondence that the liquidator had sent. 81Relevantly, in that correspondence Mr Hayter asserted the belief that emails passing between employees of any of the Accord Pacific companies and the prior administrators, as well as the independent report obtained by the company as to car park revenue in 2006, were part of the books and records of the company. Whether or not that be correct, there is nothing to suggest that this was not a view genuinely held by those advising the liquidator or that the liquidator's purpose in pressing for those documents was not a proper purpose. 82The suggestion that what Hyperion was seeking was a commercial settlement to recoup its losses from the lease transaction gains some support from an email exchange on 9 May 2011 between Mr Hayter and Mr Gleeson, the former seeking a comment from Mr Gleeson as to whether, if one could assume the claim was about $1.5m, considering the loss of Hyperion, they would be "looking at" a "settlement range" of about $300,000 to $500,000". Mr Gleeson's response was that the parent company could always put up a deed of company arrangement which would resolve the fiduciary duties issues. On balance, I consider that this sheds not much light, if any, on Mr Gleeson's purpose in the examinations (though it does support the conclusion that Hyperion's motivation throughout has been to achieve the make good of its losses, whether through litigation or a settlement, and that Mr Hayter continues to have some informal advisory role for Hyperion in that regard). 83Of more concern to me was an email of 17 May 2011 from Mr Gleeson to Higgins and Mr Greenwood (copied to Mr Hayter), commenting on the outcome of the examinations and correspondence thereafter and stating: As we suspected from the start the resident director is the stooge for the overseas directors and the upcoming examinations on 28 June 2011 will be an attempt to flush them out. At this stage, whilst there are other examinees on that day it remains to be said whether they will attend this date. However, we will continue to keep immense pressure on them. I will be attending the 28 June examinations We are quite happy with the position that some of the lack of information/responses provided so far has afforded us as we now have some leverage points. We will shortly be despatching a report to creditors discussion the status of the matter, albeit for obvious reasons we will not be going into the depth of our actions in any great details. I am satisfied with where the matter is at currently and obviously aware your desire to get a significant recovery in same.... (my emphasis) 84I accept that the reference to "immense pressure" again appears to be in the context of pressure on the overseas directors to attend the examinations (not necessarily pressure to compromise a claim in order to avoid the examinations, for example) but what concerns me is the reference to "leverage points" - since it is by no means clear to what the perceived leverage points were thought to relate. (In submissions, Mr Golledge speculated that this might have meant leverage arising in the examinations or subsequent proceedings from the fact that the proposed examinees had not proffered an explanation of events at an earlier stage. However, as he made clear, this was no more than speculation.) 85Mr Higgins' email of 18 May 2011 to Mr Gleeson, responding to the 17 May communication sheds little light on that point, other than suggesting that Mr Higgins was assessing the evidence as to whether it would assist an insolvent trading claim (rather than any separate claim Hyperion might have against the vendor of the property, APP), he saying: Very happy with the outcome of round 1. If garcon [presumably a reference to Mr Gargano] was the only director I believe we would have them on toast. I also think the other two will drop themselves in our lap also. There appears to be no evidence that APL did any due diligence re the lease and therefore I am confident they entered a contract which would reasonably lead to an insolvent event and therefore liability to directors and holding company. Note also we don't have to prove insolvency at the time, just a reasonable chance it would lead to insolvency. Given what we heard in court I feel confidence of our chances. 86In late May, there was an exchange of communications between APH and Mr Gleeson in which (by letter of 27 May 2011) APH asserted its position (that it had lent "real money" to the company for it to meet its external liabilities; that the company's independent auditor's view was that there was no insolvent trading (which is consistent with the directors' view); that it should have been obvious that there were no insolvent trading issues and that the liquidator's actions were an abuse of process) and Mr Gleeson's response (of 31 May 2011) in which he confirmed that he had not received and would not accept instructions concerning the external administrators' conduct of the affairs of the company from Hyperion representatives; had not made a final determination on any creditor's claims; and would require further information from Hyperion to support its claim. Mr Gleeson stated that the purpose of the examinations was to gather appropriate information to assist in the investigation into the financial affairs of an insolvent entity and expressed the view that the sale and lease were interdependent and therefore relevant. He raised the fact that no report had been provided going to the reliance of the company on an independent real estate agent's report (of the kind to which Mr McDonald had referred during his examination). 87The response from APH (via a letter from Mr McDonald on 6 June 2011) was simply to make the bald assertion that there was clearly no trading whilst insolvent and to allege oppression.

1. I dismiss the plaintiff's application to set aside the examination summonses and orders.
2. I note that the Orders for Production are to be amended in accordance with short minutes to be prepared by the parties. 149I will hear the parties as to costs.

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